Unhedged foreign currency exposure may be the way to go for super funds after a fall in the Australian dollar contributed 8.8% to unhedged portfolios in the last financial year.

This bucks the trend of recent years. According to the NAB Superannuation FX Survey, released yesterday, fully hedged exposure to foreign equities has brought considerably higher returns over the last 10 years, adding 25%.

Unhedged exposure, on the other hand, would have lost you 37% due to the steadily rising Australian dollar.

However, NAB currency overlay director Danica Hampton said: "With the steep fall in the Australian dollar, after years of sustained currency strength, most super funds are sharpening their focus on foreign exchange issues.

"This attention has paid off for a number of funds, with the recent weakness of the Australian dollar and lower hedge ratios contributing to their strong investment performance in the last year."

NAB's survey, carried out every two years, also found a modest rise in superannuation fund exposure to foreign currency, from 17% in 2011 to 18.2% in 2013. A significantly higher proportion of super funds rank currency as an important factor - 83% compared with 73% in 2011.

The number of funds using currency specialists has also risen since 2011 from 84% to 88%.

But uncertainty abounds. "An overwhelming majority of respondents - 80% in fact - think that nobody is able to predict where the currency will be in 12 months' time," Hampton said.

"Nonetheless, there is some agreement about the broad currency trends; 67% of respondents expect the AUD/USD to fall from current levels, although 77% believe it's not in a new, higher trading range."

The timing of NAB's survey was in some ways unfortunate, as it concluded just days before the dollar began to plummet, when it was still trading between $1.02 and $1.06 against the US dollar.

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